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Should I buy an apartment or a house?

Apartment vs house: Which property should you buy and why?

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Choosing between buying an apartment or a house depends on your finances, your lifestyle and your property goals.

While some people prefer the space and flexibility of living in the suburbs, others favour the convenience of inner-city living. From price to space and maintenance requirements, both houses and apartments have several pros and cons. If you're buying a property for investment purposes this becomes a whole different question, depending on your strategy as an investor.

Whatever you choose, we've outlined the issues you need to consider and the benefits and drawbacks of both houses and apartments.

Home graphicBuying a house

Pros

  • Floor space. If you want to conquer the final frontier and get more space for your family to live in comfortably, houses offer far more room to move than apartments.
  • Outdoor space. If you have a green thumb, you want to expand your home or if you have young kids, a backyard is useful. You can build a pergola or entertaining area and enjoy the freedom of having your own outdoor space.
  • Flexibility. If you own a house, you can more or less do what you want — there are no owners’ corporation or strata laws to abide by. As long as you keep council and building regulations in mind, you’re pretty much free to renovate however you like. You can expand or upgrade the house, adding value and making the place more liveable.
  • Privacy. Another benefit of living in a house instead of an apartment is that you’re generally not living in as close proximity to your neighbours. So you can enjoy your life without having to worry about disturbing your neighbours (or being disturbed by them).

Cons

  • Maintenance. Lawns need mowing, gutters need cleaning, trees need trimming and windows need washing. A house can be a lot of work. That's fine if you love DIY projects and gardening. If you don't, the extreme low maintenance aspect of apartment living is pretty appealing.
  • Higher costs (and more bills). Living in a house is generally more expensive than living in an apartment. You have more space to heat and cool, and more furniture and equipment to buy.

Buying an apartmentApartment graphic

Pros

  • More affordable. While there are some exceptions to the rule, apartments are generally cheaper to buy than houses. According to figures from Domain Group (Domain House Price Report March Quarter 2018), Sydney’s median house price was $1,150,357. The median apartment price was just $740,041.
  • Less maintenance. You don’t have to mow the lawn or tend to the garden when you own an apartment. There’s also the fact that there are plenty of maintenance tasks that can be looked after by strata, meaning you have more free time to do whatever you want.
  • Low cost. While the reduced space of apartments can be a drawback, it also results in cheaper electricity and gas bills.
  • Location. Many apartments are built near city centres, allowing you to live closer to everything, from transport and schools to restaurants and even your work.
  • Extra facilities. Owning an apartment might also give you access to a whole host of building facilities. There could be a pool, gym, tennis courts, playground, and even a shared garden. These added inclusions need to be taken into account when deciding whether to buy an apartment or a house.
  • Security. Thieves often have to pass through several layers of security to get to your apartment door, which isn’t the case with many houses.

Cons

  • Strata/Owners’ corporation by-laws. Living in an apartment means abiding by the rules imposed by the owners’ corporation, such as not hanging washing over the balcony or not having pets in the property. If you want to renovate or upgrade your apartment, you may need to seek approval first.
  • Fees. You’ll also need to pay a fee to the owners’ corporation to cover shared maintenance costs, so remember to take this into consideration when calculating total costs.
  • Less space. Apartments don’t offer as much living space as houses.
  • Less privacy. If you don’t like listening to your neighbours fight, entertain guests or get up to anything else in the privacy of their own home – or the fact that they can probably hear you doing the same things – apartment living may not be for you.

Do houses or units make for better investments?

If you're investing in property the apartment versus house question looks quite different. And it comes down to your strategy and goals.

Rental income

All other things being equal, a house will bring in more rental income than an equivalent apartment. But possibly not as much as the extra purchasing cost, given that houses sell at much higher prices. If you're looking to maximise rental income while minimising expenses then an apartment might be a better fit. Crunch the numbers and work out which is better for you. But you'll also need to consider capital growth.

Capital growth

Most investors are really focused on making capital gains, which refers to the growth in value of the property. In a rapidly rising market many properties have even doubled in value over five to ten years. This investment strategy has been a huge wealth creation vehicle for many Australians and has played a large role in fuelling the recent property boom.

The data is clear: houses show much stronger capital growth than apartments. The majority of Aussies prefer houses, and owning land is seen as more valuable than owning a piece of an apartment complex high up in the sky. But this trend is slowly changing as more and more Australians live in apartments.

So if you’re trying to decide whether to invest in a house or an apartment, it’s worth looking past the type of property and examining each potential investment on its merits. Where is it located? What facilities does it offer and what other amenities are nearby? What sort of capital growth could you expect from this type of property? How much rental income could the property generate? Answering these questions will help you make up your own mind.

House vs apartment: making your decision

Regardless of whether you’re an owner-occupier or an investor, the best way to solve the apartment vs house dilemma is to consider your needs and plan ahead. For example, if you’re thinking of starting a family in a few years, is a tiny inner-city apartment really the best option? On the other side of the coin, if your kids will most likely leave home in the next few years, is a massive five-bedroom house the best solution?

Once you know what you need in a home or an investment both now and into the future, you’ll be able to decide whether an apartment or a house is right for you.

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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.29%
2.31%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.34%
2.34%
$0
$0 p.a.
60%
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% (<$500k Owner Occupier, P&I)
2.64%
2.81%
$300
$10 monthly ($120 p.a.)
60%
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
IMB Budget Home Loan - LVR ≤80% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.61%
2.67%
$449
$0 p.a.
80%
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
2.19%
2.20%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
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Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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